New York City Saks Inc. announced Tuesday that third-quarter losses of $42.8 million and a net-sales decline of 13% (to $698 million from $796 million a year ago) will prompt the company to cut its 2009 capital spending by 40%.
Capital expenditures will be reduced to $75 million for fiscal 2009, down from $125 million for the current year.
The cutback in capital expenditures follows similar moves by retailers, such as Target and Macy's, in response to a dramatic pullback in consumer spending.
Saks' announcement came as the retailer reported a wider-than-expected loss in the third quarter in contrast to a profit a year ago.
The company said it lost $42.8 million in the quarter ended Nov. 1, in comparison to a profit of $21.6 million in the year-ago period. Net sales fell 13%.
The retailer also issued a dour outlook Tuesday, predicting deteriorating profit margins in the fourth quarter amid heavy discounting. It also plans to cut spring inventory by 15% year-over-year.
"The current macroeconomic environment is unprecedented and consequently, it is impossible to predict future performance with any degree of certainty," Stephen I. Sadove, chairman and CEO of Saks, said in a statement.
Like many luxury retailers, Saks had seen its business slow down this past summer as the economy deteriorated, but the financial crisis intensified in September, leading to massive layoffs at investment firms, sharply lower stock prices and a dramatic cutback in spending by the wealthy.
In a desperate attempt to pull shoppers in, Saks was forced to slash prices on merchandise, including new arrivals, a move that hurt its profit margins.
Same-store sales fell 5.9% in August, 10.9% in September and 16.6% in October, representing an 11.5% drop for the quarter overall.
Meanwhile, its OFF 5th outlet business fared better than the company's average for the period, but business was "significantly below prior quarters," according to Sadove.